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Tuesday, July 19, 2011

The Real Reasons for Slow Recovery

by Keith Cooper

From Broader View Weekly, June 23, 2011.

Last week former GOP House Speaker and apparent 2012 Presidential Candidate Newt Gingrich referred to the current economic downturn as the “Obama Depression”. It was an effective sound bite and popular with the conservative media and with the rabid right of the Republican base. Tea Partiers and disgruntled conservatives, angry at Obama and seeking any justification for their visceral disdain ate it up. Radio personalities Sean Hannity and Rush Limbaugh used identical talking-point phrases to imply that the U.S. is headed for a “double dip recession – some say ‘depression’”.

But few people other than those with an agenda tied to economic failure under President Barack Obama’s auspice believe that a second wave of recession is likely. And no one paying attention to the economic indicators is taking the word “depression” seriously. Even the right’s exalted Wall Street Journal discounted reports of a potential relapse. In the article “What it Would Take to Do a Double Dip”, Justin Lahart made the case that it would “take a significant shock to knock the economy off course”.

In all the talk of economic recovery – especially in the conservative media and blogosphere – it is easy to lose sight of the economic facts surrounding the issue. It is true that unemployment remains at nine percent and recovery is moving slower than expected or desired. But blaming Obama for the slow growth ignores factors outside his policies.

One important consideration is that this is not Obama’s recession. The collapse of the financial market, bursting of the housing bubble and decline of industry are the results of decades of failed economic policy, spanning the Reagan, Bush, Clinton and Bush administrations, and culminating in the deepest recession in years.

Since Ronald Reagan’s presidency, Washington’s lopsided policies have benefited the nation’s corporate and elite wealthy, while shortchanging the working poor and the middle class. Through subsidies, deregulation, tax breaks and other legislation the government has feathered the nests of Corporate America at the expense of our children, grandchildren and great-grandchildren – without demanding a return on that investment in the form of job and industry growth.

A recent report illustrates the fact that George W. Bush’s tax cuts for the wealthy “have exacerbated the trend of widening income inequality, accompanied the worst economic expansion since World War II, and turned budget surpluses into deficits.” The Economic Policy Institute released a June 1 report titled “Tenth Anniversary of The Bush-Era Tax Cuts: A decade later, the Bush tax cuts remain expensive, ineffective, and unfair”, in which Andrew Fieldhouse and Ethan Pollack listed how the breaks disproportionately benefited the wealthy, while failing to trickle down to the working class and failing to stimulate economic growth. But, even during Bush’s administration, the lack of stimulus was evident as the country hemorrhaged jobs at a rate of 700,000 per month at the end of his presidency.

Of course, my brother Gordon will claim that Obama continued the Bush tax cuts under the advisement of many economists. It is true that he publicly admitted that some economists did recommend extending the tax breaks for the wealthy, but there is little reason to assume he favored the decision. In fact, Democrats and the president were blackmailed into acting against their will by Republicans who were holding the working poor and unemployed hostage at the end of last year.

Despite the insistence that these policies would allow the “job creators” to boost the economy, Corporate Wealth chose instead to invest overseas, outsourcing jobs and devastating industry. Until we begin investing in real job creators – education, tomorrow’s technology, employment opportunities that pay substantive wages, infrastructure that yields long-term benefits – the United States will fall behind other competing nations and the economy will fail to grow.

There are some who believe that Corporate America is conspiring against Democrats and working to stifle economic prosperity for political reasons. It is true that Republicans have a reputation for catering to the corporate agenda, and blaming Democrats for a faltering economy will certainly help the GOP in next year’s elections. It is also true that despite the fact that profits are rising, job creation has remained relatively stagnant. It is conceivable that big business is holding the working poor for ransom in the form of political power.

One need only look at the power that corporate lobbyists have over legislators of both parties to see the immense power they already exert. Instead of bringing forth legislation aimed at creating jobs, Congress remains mired in fights over repealing the health care reform designed to provide coverage for the neediest Americans, and reinstating the Don’t Ask, Don’t Tell Act – bickering that does not benefit those struggling in a weakened economy.

Congress is also preoccupied in a debate over the national debt and the deficit. In the Wall Street Journal article mentioned earlier, Lahart admits that this protracted battle is debilitating to economic growth. Experts feel that the uncertainty of foreign debt, the impact on credit and the potential of default is creating instability in the market.

The Republicans’ emphasis on the budget deficit (when the primary concern of most Americans is the job deficit) is damaging consumer confidence, which in turn slows economic growth.

All of this, of course, plays favorably into the GOP strategy. A weak economy heading into 2012 will only benefit opposition candidates as they seek to present themselves as a positive change. They may need to propose a viable solution to the ails of the current economy, but in the current climate of public opinion the collateral of political rhetoric outweighs hard facts – bumper-sticker slogans trump real legitimate ideas.

At any rate, don’t look for legislation aimed at creating jobs and growing the economy within the next year-and-a-half. Republicans will be hard at work attacking the Democrats for the deficit George Bush worked hard to create, and obstructing any policy designed to aid real hard-working Americans. Democrats will be busy caving to the whims of a Tea Party minority that imposes its will as if it were the majority voice.

We must either eliminate the current two-party system in which both sides are beholden to corporate interests – and which places political ideology ahead of public service – or we must hold our leaders’ feet to the fire and demand adequate representation. The status quo is unsustainable if we ever again wish to compete in the global economy. I fear, however, corporate-driven policy and partisan politics will continue to hinder our weakened economic system.